The New Jersey Supreme Court lifted a foreclosure ban on Ally Financial this week, removing the last state barrier for mortgage servicers to fully resume operations a year after their widespread "robosigning" procedures came to light.

The court allowed GMAC Mortgage, a subsidiary of Ally's Residential Capital mortgage arm, to resume foreclosures in New Jersey a month after it gave a green light to five other major mortgage servicers. New Jersey was the last state to lift a ban on foreclosures after last year's robosigning scandal, when the nation's largest servicers (typically banks) were found to be cutting corners in processing thousands of documents.

Ally had asked the court to seal some of the servicing documents it was required to submit as part of the state's investigation into its robosigning procedures, said Kevin M. Wolfe, an assistant director for the court's civil practice division.

Supreme Court Judge Mary C. Jacobson, who oversees uncontested foreclosure cases in New Jersey, denied Ally's request on April 13. The request and its denial delayed Ally from resuming foreclosures at the same time as other mortgage servicers, Wolfe said.

New Jersey set one of the highest bars for the six largest mortgage servicers to resume foreclosures after last year's robosigning scandal. Bank of America Corp., Citigroup, JPMorgan Chase, One West Financial Services, Wells Fargo and Ally suspended foreclosures in the state a year ago, pending the Supreme Court's review.

The court's rules made it impractical or unfeasible for the servicers to resume foreclosures until last month. Jacobson required that the servicers "show cause" as to why they should be allowed to resume foreclosing on delinquent homeowners. She appointed retired Judge Richard J. Williams as a special master, and asked him to conduct a review to determine that servicers were adhering to legal "processes and procedures."

All six servicers were singled out because their employees had admitted in depositions to signing hundreds of foreclosure documents a day without verifying that the information contained in them was correct. The New Jersey Supreme Court said it was particularly concerned because more than 90% of foreclosure proceedings in the state are uncontested, meaning that there was no other verification process required before a bank could evict a homeowner.

There was no way "for courts to be able to separate assertions that were accurate from those that were not," Williams wrote in a 22-page document filed Monday that allowed Ally to resume foreclosures.

But the New Jersey court also acknowledged its own limitations.

"While there has also been much public discussion and litigation concerning complex issues relating to the standing of mortgagees and loan servicers to foreclose," these broad issues "are beyond the scope of the Special Master's charge," Williams wrote.

Williams will soon begin a monitoring process of the mortgage servicers' foreclosure operations in New Jersey, including site visits, according to Wolfe.

The banks are still operating under federal consent orders over their foreclosure procedures. They are also attempting to hammer out a settlement agreement with state attorneys general.
Ally submitted at least 10 signed affidavits describing its foreclosure procedures to the New Jersey Supreme Court. It created a nine-day training program for employees reviewing foreclosure documents, and it now provides "underlying documents including the note, mortgage and any assignments," in individual foreclosure cases, according to documents Ally submitted to the court.

Last year GMAC employee Jeffrey Stephan testified that he signed 400 affidavits a day without verifying that the facts contained in them were correct. His testimony appeared four years after a Florida court sanctioned GMAC for "robo-signing" practices and required that the servicer modify its procedures.

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